Cleared For Takeoff, page-22

SP’s go up and down and cycle around the fair value of the company as it stands and the prospects it affords. Microcaps like this typically display a much greater magnitude in the cycle as a result of the impatience of the average investor (treats these stocks like a lotto ticket, which many aren’t), greater propensity for news vacuums and shifts in liquidity levels. For one to be disappointed in the company and its progress because the SP is in the downward part of that natural cycle is ignorance to the process of investing in such a company as far as I’m concerned, particularly when the fundamentals haven’t changed. Progress is not judged by tomorrow’s price action or whether you are watching paper profits decline or paper losses open up (if you bought on the hype) its judged by the decisions and action of management and most importantly the resulting CF and EPS growth, which to date has been delivered as does not need defending.

For those that bought on the back of the broker reports at a higher price, if you are disappointed that the SP has drifted down since and the company has not issued news to get the SP back up, it is not the company’s problem it is yours. If nothing has fundamentally changed and your total return expectations since you bought shares over 30cps remain the same, rather than being disappointed and contemplating selling in disgust less than two months later, you should instead consider buying more shares as the lower the SP goes, the greater the potential payoff has become, whilst counter-intuitively the risk of holding and waiting for that payoff has decreased as well (price backed by existing CF generation).

TL;DR The company doesn’t need to be defended for its achievements to date. There is nothing to be disappointed about yet. Effectively as the SP drifts down the risk reward ratio continues to increase at both ends as the payoff goes up, whilst the risk goes down.